Sugary Drinks: Industry Challenges And Opportunities

Whether or not evidence linking sugary drinks and obesity is conclusive, it is clear that consumers are curbing soda consumption. Such a purchasing shift presents obvious challenges to the beverage industry but also a wealth of growth opportunities.

New York City Major Michael Bloomberg recently proposed a ban on the sale of sugary beverages in quantities greater than 16 ounces in the city’s restaurants, delis and movie theaters as a direct response to the obesity epidemic. The proposal is one of the most recent attacks on the nation’s soda industry, which has struggled as consumers turn to healthier beverage options.

Large players in the industry call the proposal a political move rather than one based on sound science. The Coca-Cola Company issued a statement saying, “There is no data backing the City's proposal… We believe health policy should be driven by facts, not agenda.” According to the company, calories from sugary beverages only account for approximately 7 percent of the American diet.

However, New York City Hall officials cite a 2006 study as justification for their support of Bloomberg’s proposal. They say the study suggests a link between sugar-sweetened drinks and long-term weight gain as well as higher rates of heart disease and diabetes.

Consumers have been curbing sugar-sweetened soda consumption long before the New York City soda ban hit the news. As more focus is placed on health and nutrition, shoppers are consuming less sugary soda. The Coca-Cola Company states that Americans’ added-sugar consumption from soda decreased by 39 percent from 1999 to 2008.

Such statistics are cause for alarm for the soda industry, but this shift in consumer preference also offers unique opportunities for the sector. While beverage companies face an uphill battle, creative marketing and product development can help them overcome these challenges.

Perhaps the most obvious choice for soda makers would be to focus on developing more diet drinks. But developing a successful diet soda presents its own challenges. Many consumers avoid diet soda for a variety of reasons, including off-tastes and concern about the safety of artificial sweeteners such as aspartame.

Beverage companies have responded to such consumer sentiment by developing lighter soda options without nixing all of the calories. Pepsi recently introduced Pepsi Next, a soda featuring about half the calories of its regular soda, and Dr Pepper Snapple released Dr Pepper Ten, which is marketed as having the same taste of regular Dr Pepper with only 10 calories. Coca-Cola has yet to release mid-calorie versions of its drinks, but the company says it is actively testing altered formulas that use stevia and other natural sweeteners.

While working on these lighter options, the same companies are also expanding their portfolios to include alternative beverages like juices and sports drinks. The Coca-Cola Company says it offers in excess of 700 beverage choices in the U.S., including sodas, water, juices, teas and energy drinks.

Any beverages containing at least 70 percent juice would be exempt from New York City’s proposed ban, and sports drinks have a history of being perceived as healthier by consumers. Other drink options, such as bottled water and teas, also continue to be well-received by health-conscious shoppers.

New York City’s sugary drink ban is expected to be approved by the city’s Board of Health after a three-month comment period, but soda makers say they won’t go down without a fight. If and when the ban is approved, it could face legal action by some of the country’s larger beverage companies, which argue that their businesses are being unfairly discriminated against.

Whether or not the ban goes into effect, it is clear that consumers are taking a stand for their health, and many shoppers are altering their beverage choices as a result. Beverage companies must invest in the development of diet sodas and alternative drinks in order to fulfill America’s new taste for healthier options.

Will New York City’s sugary drink ban impact your business? How is your company dealing with America’s rising interest in healthier food and beverage options? Let me know at lindsey.coblentz@advantagemedia.com.